#Gold Technical Analysis# On Tuesday (August 27th) during the US trading session, spot gold suddenly surged from around $2503 per ounce to reach a peak of $2526 per ounce within the period. FXStreet analyst Christian Borjon Valencia wrote on Wednesday, analyzing the technical trend of gold prices.
(Spot gold 30-minute chart, source: 24K99)
At the close of Tuesday, spot gold rose 0.26%, closing at $2524.54 per ounce; the lowest price during the day was $2503.28 per ounce.
Valencia pointed out that on Tuesday, with the weakening of the US dollar, the price of gold in the North American market steadily rose. Federal Reserve Chairman Powell's dovish remarks kept US Treasury yields stable, pushing down the US dollar and boosting gold.
Powell stated last Friday that the time for policy adjustments has come, sending a strong signal for interest rate cuts.
During the New York trading session on Tuesday, the US dollar index significantly declined from the session high of 100.91, hitting a low of 100.51.
(USD Index 30-minute chart Source: 24K99)
Valencia added that the escalation of tensions in the Middle East also provides momentum for the rebound in gold prices. The conflict between Israel and Hezbollah escalated over the weekend, and concerns about the potential for further escalation will benefit gold.
On Tuesday local time, John Kirby, a spokesperson for the United States National Security Council, stated that the United States believes Iran is "ready" to launch retaliatory actions against Israel, hence the United States has strengthened its military deployments in the region. The message sent by the United States to Iran is not to retaliate against Israel, there is no reason to escalate the situation or provoke a regional war; but if Iran attacks Israel, the United States is prepared to protect Israel.
On Tuesday local time, Iranian Deputy Minister of Defense Kureishi stated that Israel has committed unforgivable crimes regarding the assassination of former Hamas leader Haniyeh in Tehran, although Iran considers war unacceptable, any Iranian response to enemy attacks and threats is based on legitimate rights and deterrence principles, Iran will decide the time and extent of responding to threats.
Kureishi stated that for now, the Israeli regime must continue to be in a state of mental anxiety and panic, what can be certain is that Iran's response will be unpredictable.
How to trade gold?
Valencia pointed out that despite the recent price trends indicating traders' reluctance to position themselves before the release of U.S. PCE inflation data, there is still an upward trend in the price of gold.
From a momentum perspective, the Relative Strength Index (RSI) has failed to surpass the previous peak, contrary to the trend of gold prices, indicating a possible negative divergence that may be imminent.
Valencia stated that if the price of gold falls below this week's lows of $2503 per ounce and $2500 per ounce, this would pave the way for a deeper pullback. The next resistance level will be at the high of July 17 at $2483 per ounce, followed by the psychological barrier of $2450 per ounce.
If gold continues to decline, the support is expected to be at the 50-day Simple Moving Average (SMA) of $2410 per ounce, and then $2400 per ounce.
(Spot gold daily chart source: FXStreet)
On the other hand, Valencia added that if the gold price breaks through the historical high of $2531 per ounce, it may rise to $2550 per ounce, and then challenge $2600 per ounce.
At 08:37 Beijing time, spot gold was trading at $2525.70 per ounce.